California stands to lose $278 billion without undocumented workers: report

OAKLAND, Calif. - A new report has found that the economic impact of the federal government’s mass deportations in California could result in a loss of more than $278 billion for the Golden State.

The report, by the economic and policy think-tank Bay Area Council Economic Institute, took an in-depth look at what the state stands to lose amid the Trump administration's hard-line and expanding immigration enforcement and crackdown.

Researchers noted that California has the highest share of the immigrant population in the nation. 

Within the state, immigrant populations vary widely by region, though in key areas, immigrants make up more than half the population, including in densely populated coastal urban areas in the Bay Area and in the Greater Los Angeles region, as well as in agricultural hubs of the Central Valley.

"These regions are critical drivers of California’s economy and understanding the potential impact of deportation on local, state, and national economies has never been more critical," the institute said. 

By the numbers:

The study found that among California’s 10.6 million immigrants, almost 2.3 million are undocumented.

That represents one in five immigrants and 8% of all workers in the state, the analysis found.

Furthermore, figures showed undocumented workers generate almost 5% of California’s gross domestic product, based on direct wage contributions alone.

Researchers said that those workers contribute more than $23 billion a year in local, state, and federal taxes.

Losses in the billions

When looking at the projected decline in California’s gross domestic product without the labor from undocumented workers, the study said that the state stands to lose almost $153 billion in direct effects, which researchers described as the value of the work contributed by undocumented immigrants and the wages they earn. 

The study also analyzed what it called indirect effects, defined as the "broader economic impact of supply chain disruptions and reduced business activity in industries that rely on undocumented labor." Researchers found when factoring in the indirect effects, the loss jumps to $212 billion. 

Researchers then looked at what their analysis called induced effects, described as the impact of undocumented workers’ household spending on goods and services, which includes housing, food, transportation, and healthcare. The study found given that factor, the total economic loss in California rises to $278 billion. 

What they're saying:

"These losses underscore the far-reaching role undocumented workers play in sustaining economic output across California’s communities and industries," the institute said.

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Researchers explained that the loss of these contributions would result in California falling in its global economic ranking, dropping two spots, to 7th place, behind India and the U.K. (This was based on earlier rankings that placed the state as the 5th largest economy in the world. The latest rankings show California is now the 4th largest.)

Mass deportations on California industries

The report also broke down how the mass deportations would affect specific industries that rely on a workforce that includes a large population of undocumented workers.   

Agricultural sector:

When it comes to California's massive agriculture sector, the think tank found that more than a quarter of the industry’s workforce was undocumented and a loss of that population would shrink the industry’s GDP by 14%.

Construction industry:

The construction sector would also be severely disrupted, according to the study, which found undocumented immigrants made up 26% of that industry.

And a loss of those workers would lead to a contraction of almost 16% in the GDP generated by California's construction industry.

Occupations

When narrowed down to specific occupations, "The concentration of undocumented and immigrant workers is especially pronounced in frontline and essential roles," researchers explained. 

For instance, 74% of maids and housekeepers in California are immigrants, with more than 35% undocumented.

As for the specific occupation of agricultural workers, almost 75% are immigrants, with about 33% undocumented.

Among landscapers in the state, about 63% are immigrants and almost 22% are undocumented. 

"Many of these workers play critical roles in everyday life: they grow and cook our food, clean homes and buildings, construct housing, care for children and the elderly, and ensure packages are packed and delivered," researchers said. "Their contributions are not marginal, they are foundational to the functioning of California’s economy and to the daily routines of millions of residents – both immigrant and non-immigrant."

Entrepreneurs, small business owners

The Bay Area Council Economic Institute also looked at the contributions of immigrants as entrepreneurs and small business owners.  

Researchers cited figures that showed that in 2024, 45% of all Fortune 500 companies in the U.S. were founded by immigrants or their children. Among those firms, 10% were based in or were founded in California. 

The report found that immigrants owned almost 40% of small businesses in the state, with 11% of those owned by undocumented entrepreneurs.

"Immigrants are generating businesses, jobs, and tax revenue for the state, from leading start-ups supported by venture capital firms to filling the downtowns of small towns with restaurants and shops," the report said.

Federal enforcement policies

The Bay Area Council Economic Institute said that over the past three decades, there has been increased focus on immigration enforcement policies. The group said this current administration, however, "has made large scale deportation a center piece of its policy priorities: calling for ‘the largest deportation operation in American history.’" 

And with California's role as the country’s largest state economy, the ripple effects of these enforcement actions are expected to be felt beyond the borders of the Golden State. 

"Large-scale federal enforcement actions – including proposed mass deportation policies – could trigger widespread labor disruptions," the institute said, noting, "disruptions in California would reverberate nationwide."

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